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INCOME TAX APPEAL No. - 159 of 2016

AFR

Reserved on 21.08.2019

Delivered on 03.09.2019

Court No. - 35

Case :- INCOME TAX APPEAL No. - 159 of 2016

Appellant :- M/S S.D. Traders

Respondent :- Commissioner Of Income Tax And Anr.

Counsel for Appellant :- Suyash Agarwal

Counsel for Respondent :- C.S.C. I.T.,Krishna

Agarawal,Pravin Kumar

Hon'ble Bharati Sapru,J.

Hon'ble Rohit Ranjan Agarwal,J.

(Delivered by Hon'ble Rohit Ranjan Agarwal,J.)

1.This is an assessee's appeal under Section 260-A of the

Income Tax Act, 1961 (hereinafter called as 'Act') assailing the

order of the Income Tax Appellate Tribunal, Lucknow Bench,

'A' Lucknow (hereinafter called as 'Tribunal') dated 24.02.2016,

affirming the order of the CIT (A) as far as regarding addition

out of sundry creditors to the extent of Rs.15 lacs and

disallowance of 25% of the labour charges. The appeal was

admitted on 05.07.2016 on the following question of law:-

“(i) Whether the Appellate Tribunal was legally justified

in holding that CIT(A) in exercise of power of

enhancement u/s 251 has power to consider new

source of income which was not dealt by A.O. in

assessment order ignoring the Full Bench decision of

CIT vs. Sardari Lal & Co. 251 ITR 864 (Del) (FB)?

(v) Whether the Appellate Tribunal was justified in not

considering that after set-aside proceedings by Hon'ble

high Court, the CIT(A) has not issued fresh notice of

enhancement (although time barred) and followed the

its earlier order without application of mind?”

2.However, vide order dated 02.05.2019, this Court allowed

Neutral Citation No. - 2019:AHC:144411-DB

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INCOME TAX APPEAL No. - 159 of 2016

the application filed by the appellant for additional question of

law proposed by him which are as under:-

“(iii) whether the ITAT was correct to disallow Rs.5.95

lacs, being 25% of labour charges ignoring the

increasing trend in the G.P rate of 17.79% in this year

as compared to 13.79% in A.y 2005-06, specially when

all the expenses were vouched and verifiable being

the books of accounts are duly audited u/s 44AB of the

Act, in the absence of its rejection and the books have

not been rejected.

(iv) whether the ITAT has rightly sustained the addition

of Rs.15 lacs out of Sundry Creditors for onus of

discharge of verification after 7 years, on appellant

while legal observation to preserve the books of

Accounts and other documents, for 6 years from the

relevant assessment years and third party is under no

obligation to provide confirmation or verification

beyond 6 years from the relevant assessment years.”

3.On 03.05.2019, the above mentioned question of laws

were incorporated by the appellant in the paper-book as

question nos. III and IV. Assessee/ appellant is in business of

civil contract, and for assessment year 2006-07 disclosed his

job work receipts amounting to Rs.90,35,009/- and declared

gross profit of Rs.16,07,474/- whereas net profit was shown as

Rs.3,62,113/-. Return of income was filed on 31.10.2006 and

the same was processed under Section 143(1) of the Act on

14.09.2007. Case of the assessee was selected for scrutiny

and notice under Section 143(2) was issued on 19.10.2007, as

well as notice under Section 142(1) along with questionnaire

was issued on 08.08.2008. According to assessee, he replied

the queries raised by Assessing Officer. AO completed

assessment and made three additions.

4.The order of assessment was challenged by assessee

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INCOME TAX APPEAL No. - 159 of 2016

before Commissioner of Income Tax (Appeals), who on

13.09.2013 issued notice requiring appellant to produce labour

register including bills, vouchers and ledger accounts as well

as details of sundry creditors. On 14.11.2013, CIT (A) passed

an order enhancing income of appellant by Rs.26.50 lacs

which includes disallowances to the extent of 50% of wage

expenses claimed by appellant in profit and loss account and

50% of sundry creditors appearing in balance sheet of the

assessee.

5.Order of CIT(A) was challenged before the Tribunal by

assessee, and on 14.04.2014, Tribunal dismissed the appeal

of assessee. Aggrieved by this order assessee preferred an

Income Tax Appeal Defective No. 145 of 2014 before this

Court. On 10.12.2014, this Court set aside the order of CIT (A)

and of the Tribunal, and restored the proceedings for

reconsideration before CIT (A), with a direction that appellant

shall file all required information and documentary material

before CIT (A) by 31

st

December, 2014 and shall appear

before CIT (A) for receiving directions as to hearing on 5

th

January, 2015. It was further held that in case assessee fails to

file required information and documentary material, CIT (A)

would be at liberty to pass orders on basis of available records

after furnishing an opportunity of being heard to the

assessee.

6.In compliance of the order of this Court, it appears that

assessee filed an application along with copy of order before

CIT (A) along with certain documents which have been

enclosed along with this appeal and are part of record as

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INCOME TAX APPEAL No. - 159 of 2016

Annexure-6. Further, notice under Section 250 was issued by

the CIT (A) for hearing on 05.01.2015. Thereafter, appellant

was given several opportunities on 31.12.2014, 18.02.2015,

27.02.2015, 09.03.2015, 17.03.2015 and 25.03.2015. From

the order of the CIT (A), it appears that the authorised

representative of the appellant appeared from time to time and

furnished replies/ documents. On 31.03.2015, CIT (A) partly

allowed appeal of the assessee and disallowance of

Rs.36,019/- and Rs.20,000/- were deleted, while additions of

Rs.11.50 lacs and Rs.15.00 lacs were confirmed. Against this

order an appeal was filed by the assessee/ appellant before

the Tribunal which was also partly allowed on 24.02.2016

confirming the addition of amount of sundry creditors to extent

of Rs.15.00 lacs, while disallowance on labour charges of

Rs.5.95 lacs being made. It is against this order that the

present appeal has been filed by the assessee.

7.Learned senior counsel appearing for the assessee

submitted that Assessing Officer had made three additions

which were deleted by the CIT (A) but had wrongly made

addition of Rs.11.50 lacs and Rs.15.00 lacs towards labour

expenditure and sundry creditors, as he did not had the

jurisdiction to introduce a new source of income and

assessment was to be confined to those items of income

which was subject matter of original assessment, that is the

three additions made by AO of Rs.76,019/-, Rs.20,000/- and

Rs.54,375/- only.

8.It was submitted that Section 251(1)(a) of the Act only

envisages for the appellate authority that is CIT (Appeal) to

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INCOME TAX APPEAL No. - 159 of 2016

confine its assessment to the original assessment order and

not to include the power to discover a new source of income.

Reliance has been placed upon the decision in case of CIT v.

Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC). Relevant

portion relied upon is extracted hereasunder:-

“In our opinion, this Court must be held not to have

expressed its final opinion on the point arising here, in

view of what was stated at pages 709 and 710 of the

report. This Court, however, gave approval to the

opinion of the learned Chief Justice of the Bombay

High Court that section 31 of the Income-tax Act

confers not only appellate powers upon the Appellate

Assistant Commissioner in so far as he is moved by an

assessee but also a revisional jurisdiction to revise the

assessment with a power to enhance the assessment.

So much, of course, follows from the language of the

section itself. The only question is whether in

enhancing the assessment for any year he can travel

outside the record that is to say, the return made by the

assessee and the assessment order passed by the

Income-tax Officer with a view to finding out new

sources of income not disclosed in either. It is

contended by the Commissioner of Income-tax that the

word "'assessment" here means the ultimate amount

which an assessee must pay, regard being had to the

charging section and his total income. In this view, it is

said that the words "enhance the assessments” are not

confined to the assessment reached through a

particular process but the amount which ought to have

been computed if the true total income had been

found. There is no doubt that this view is also possible.

On the other hand, it must not be overlooked that there

are other provisions like sections 34 and 33B, which

enable escaped income from new sources to be

brought to tax after following a special procedure. The

assessee contends that the powers of the Appellate

Assistant Commissioner extend to matters considered

by the Income-tax Officer, and if a new source is to be

considered, then the power of remand should be

exercised. By the exercise of the power to assess fresh

sources of income, the assessee is deprived of a

finding by two tribunals and one right of appeal.”

9.Counsel for the assessee also relied upon a decision of

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INCOME TAX APPEAL No. - 159 of 2016

the Apex Court in case of ITO v. Rai Bahadur Hardutroy

Motilal Chamaria [1967] 66 ITR 443 (SC) which had followed

the earlier decision of the Apex Court cited above. Reliance

has also been placed on the decision of the Supreme Court in

case of Additional Commissioner of Income Tax v. M/s.

Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC), following the

earlier two decisions of the Apex Court. Counsel for the

assessee vehemently argued that the power of the first

appellate authority does not go beyond what has been

considered by the Assessing Officer in appeal and reliance

upon the decision of a Full Bench in case of CIT v. Sardari Lal

and Co. [2001] 251 ITR 864 (Delhi) has been placed wherein

it has been held as under:-

“7. The learned counsel for the revenue also submitted

that this conclusion of the Division Bench needs a

fresh look. We have considered this submission in the

background of what had been stated by the Apex

Court in Jute Corporation of India Ltd. v. CIT [1991]

187 ITR 688 and CIT v. Nirbheram Daluram [1997]

224 ITR 610. In Jute Corporation of India Ltd.'s case

(supra), the Apex Court while considering the question

whether AAC has jurisdiction to allow the assessee to

raise an additional ground in assailing the order of

assessment before it, referred to Shapoorji Pallonji

Mistry's case (supra), and draw a distinction between

the power to enhance tax on discovery of a new

source of income and granting a deduction on the

admitted facts supported by the decision of the Apex

Court. Relying on certain observations made by the

Apex Court in CIT v. Kanpur Coal Syndicate [1964]

53 ITR 225, the Apex Court held that powers of the

first appellate authority are coterminous with those of

the Assessing Officer and the first appellate authority is

vested with all the wide powers, which the subordinate

authority may have in the matter. In Nirbheram

Daluram's case (supra), the decisions of Kanpur Coal

Syndicate's case (supra) and Jute Corporation of

India Ltd.'s case (supra) were also considered and it

was observed by the Apex Court that the appellate

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INCOME TAX APPEAL No. - 159 of 2016

powers conferred on the first appellate authority under

section 251 were not confined to the matter, which had

been considered by the ITO, as the first appellate

authority is vested with all the wide powers of the

Assessing Officer may have while making the

assessment, but the issue whether these wide powers

also include the power to discover a new source of

income was not commented upon. Consequently, the

view expressed in Shapoorji Pallonji Mistry's case

(supra) and Rai Bahadur Hardutroy Motilal

Chamaria's case (supra) still holds feet. It may be

noted that the issue was considered in CIT v. Mc.

Millan and Co. [1958] 33 ITR 183 (SC). Referring to a

decision of the Bombay High Court in Narrondas

Manordass v. CIT [1957] 31 ITR 909, it was held that

the language used in section 31 is wide enough to

enable the first appellate authority to correct the ITO

not only with regard to a matter which has been raised

by the assessee but also with regard to a matter which

has been considered by the Assessing Officer and

determined in the course of assessment. It is also

relevant to note that in the Jute Corporation'of India

Ltd.'s case (supra), the Apex Court inter alia observed

as follows:-

"…..The AAC, on an appeal preferred by the

assessee, had jurisdiction to invoke, for the first

time, the provisions of rule 33 of the Indian

Income-tax Rules, 1922, for the purpose of

computing the income of a non-resident even if

the ITO had not done so in the assessment

proceedings. But, in Shapoorji Pallonji Mistri

[1962] 44 ITR 891, this Court, while considering

the extent of the power of the AAC, referred to a

number of cases decided by various High Courts

including the Bombay High Court judgment in

Narrondas Manordass [1957] 31 ITR 909 and

also the decision of this Court in McMillan and

Co. [1958] 33 ITR 182 and held that, in an

appeal filed by the assessee, the AAC has no

power to enhance the assessment by

discovering new sources of income not

considered by the ITO in the order appealed

against. It was urged on behalf of the revenue

that the words 'enhance the assessment'

occurring, in section 31 were not confined to the

assessment reached through a particular

process but the amount which ought to have

been computed if the true total income had been

found. The Court observed that there was no

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INCOME TAX APPEAL No. - 159 of 2016

doubt that this view was also possible, but

having regard to the provisions of sections 34

and 33-B, which made provision for assessment

of escaped income from new sources, the

interpretation suggested on behalf of the

revenue would be against the view which had

held the field for nearly 37 years......" (p. 692)

[Emphasis supplied]

8. Looking from the aforesaid angles, the inevitable

conclusion is that whenever the question of taxability

of income from a new source of income is concerned,

which had not been considered by the Assessing

Officer, the jurisdiction to deal with the same in

appropriate cases may be dealt with under sections

147/148 of the Act and section 263, if requisite

conditions are fulfilled. It is inconceivable that in the

presence of such specific provisions, a similar power is

available to the first appellate authority. That being the

position, decision in CIT v. Union Tyres [1999] 240

ITR 556 of this Court expresses the correct view and

does not need re-consideration. This reference is

accordingly disposed of.”

10.Counsel for the assessee also relied on a decision of the

Kerala High Court in case of Commissioner of Income Tax,

Thrissur v. B.P. Sherafudin [2017] 399 ITR 524 (Kerala).

Lastly, he submitted that the CIT (A) had issued the notice for

enhancement on 13.09.2013, while the time limit expired on

31.03.2013 for assessment year 2006-07 and the said

proceedings are barred by limitation in view of Section 149(1)

(b) of the Act.

11.Refuting the arguments made by counsel for assessee,

Sri Krishna Agarwal, learned counsel appearing for the

Revenue submitted that question nos. (i) and (ii) are

substantial question of law while question nos. (iii) and (iv)

framed as additional questions are questions of fact. He

submitted that power of enhancement provided under Section

251 of the Act, is in fact, the power of Appellate Assistant

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INCOME TAX APPEAL No. - 159 of 2016

Commissioner coterminous with that of Income Tax Officer and

he can do what the Income Tax Officer do and also direct him

to do what he has failed to do. It was further contended that

CIT (A) had been empowered under Section 251 to enhance

the assessment and he may consider and decide any matter

arising out of proceedings in which the order appealed against

was passed. Power of CIT(A) cannot be limited to any

disallowances or additions made by Assessing Officer but it

extends to whole of proceedings.

12.He further submitted that assessee filed its return of

income along with balance-sheet, profit and loss account and

audited books of account in the assessment proceedings, in

which he claimed deduction on account of labour expenses

and sundry creditors. CIT (A) has power to look into such

deductions claimed by assessee in his return as well as any

credits in its books of account which assessee does not claim

to be its income.

13.Reliance has been placed upon the decision of the Apex

Court in case of Commissioner of Income Tax vs.

Nirbheram Deluram [1997] 91 Taxman 181 (SC), CIT vs.

Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) as well as

Jute Corporation of India vs. CIT [1991] 187 ITR 688 (SC),

in which the Apex Court in depth considered the power of the

Appellate Assistant Commissioner while exercising power

under Section 251 of the Income Tax Act. Further, the Apex

Court in Jute Corporation of India (supra) distinguished the

judgment passed in case of Gurjargravures (P.) Ltd. (supra)

and held as under:-

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INCOME TAX APPEAL No. - 159 of 2016

“4. Section 31 of the Income-tax Act, 1922 ('the Act')

also conferred power on the AAC to hear appeal

against the assessment order made by the ITO.

Chagla, C. J. of the Bombay High Court considered the

question in detail in Narrondas Manordass v. CIT,

[1957] 31 ITR 909 and held that the AAC was

empowered to correct the ITO not only with regard to a

matter which had been raised by the assessee but also

with regard to a matter which may have been

considered by the ITO and determined in the course of

the assessment. The High Court observed that since

the AAC had been the revising authority against the

decisions of the ITO; a revising authority not in the

narrow sense of revising those matters, which the

assessee makes a grievance but the subject-matter of

the appeal not only he had the same powers which

could be exercised by the ITO. These observations

were approved by this Court in CIT v. McMillan and

Co., [1958] 33 ITR 182 the AAC on an appeal

preferred by the assessee had jurisdiction to invoke,

for the first time provisions of rule 33 of the Income-tax

Rules, 1922, for the purpose of computing the income

of a nonresident even if the ITO had not done so in the

assessment proceedings. But in CIT v. Shapporji

Pallonji Mistry, [1962] 44 ITR 891 this Court while

considering the extent of the power of the AAC

referred to a number of cases decided by various High

Courts including Bombay High Court judgment in

Narrondas Manordass's case (supra) and also the

decision of this Court in McMillan and Co.'s case

(supra) and held that in an appeal filed by the

assessee, the AAC has no power to enhance the

assessment by discovering new sources of income,

not considered by the ITO in the order appealed

against. It was urged on behalf of the revenue that the

words 'enhance the assessment' occurring in section

31 were not confined to the assessment reached

through particular process but the amount which ought

to have been computed if the true total income had

been found. The Court observed that there was no

doubt that this view was also possible, but having

regard to the provisions of sections 34 and 33B of the

1922 Act, which made provisions for assessment of

escaped income from new sources, the interpretation

suggested on behalf of the revenue would be against

the view which had held the field for nearly 37 years. In

this view the Court held that the AAC had no power to

enhance the assessment by discovering new sources

of income. This decision does not directly deal with the

question which we are concerned. Power to enhance

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INCOME TAX APPEAL No. - 159 of 2016

tax on discovery of new source of income is quite

different than granting deduction on the admitted facts

fully supported by the decision of this Court. If the tax

liability of the assessee is admitted and if the ITO is

afforded opportunity of hearing by the appellate

authority in allowing the assessee's claim for deduction

on the settled view of law, there appears to be no good

reason to curtail the powers of the appellate authority'

under section 251(1)(a) of the Act.

6. In Gurjargravures (P.) Ltd.'s case (supra) this

Court has taken a different view, holding that in the

absence of any claim made by the assessee before

the ITO regarding relief, he is not entitled to raise the

question of exemption under Section 84 of the Act

before the AAC hearing appeal against the order of the

ITO. In that case the assessee had made no claim

before the ITO for exemption under Section 84, no

such claim was made in the return nor any material

was placed on record supporting such a claim before

the ITO at the time of assessment. The assessee for

the first time made claim for exemption under Section

84 before the AAC who rejected the claim but on

further appeal the Tribunal held that since the entire

assessment was open before the AAC there was no

reason for his not entertaining the claim, or directing

the ITO to allow appropriate relief. On a reference the

High Court upheld that view taken by the Tribunal. On

appeal this Court set aside the order of the High Court

as it was of the view that the AAC had no power to

interfere with the order of assessment made by the

ITO on a new ground not raised before the ITO, and,

therefore, the Tribunal committed error in directing the

AAC to allow the claim of the assessee under Section

84. Apparently this view taken by two Judge Bench of

this Court appears to be in conflict with the view taken

by the three Judge Bench of the Court in Kanpur Coal

Syndicate's case (supra). It appears from the report or

of the decision in Gujrat High Court case the three

Judge Bench decision in Kanpur Coal Syndicate's

case (supra) was not brought to the notice of the

Bench in Gurjargravures (P.) Ltd.'s case (supra). In

the circumstances the view of the larger Bench in the

Kanpur Coal Syndicate's case (supra) hold the field.

However, we do not consider it necessary to over-rule

the view taken in Gurjargravures (P.) Ltd.'s case

(supra) as in our opinion that decision is founded on

the special facts of the case, as would appear from the

following observations made by the Court:-

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“…...As we have pointed out earlier, the

statement of case drawn up by the Tribunal does

not mention that there was any material on

record to sustain the claim for exemption which

was made for the first time before the AAC. We

are not here called upon to consider a case

where the assessee failed to make a claim

though there was no evidence on record to

support it, or a case where a claim was made

but no evidence or insufficient evidence was

adduced in support. In the present case, neither

any claim was made before the Income-tax

Officer, nor was there any material on record

supporting such a claim...”(p.5)

The above observations do not rule out a case for

raising an additional ground before the AAC if the

ground so raised could not have been raised at that

particular stage when the return was filed or when the

assessment order was made or that the ground

became available on account of change of

circumstances or law. There may be several factors

justifying raising of such new plea in appeal, and each

case has to be considered on its own facts. If the AAC

is satisfied he would be acting within his jurisdiction in

considering the question so raised in all its aspects. Of

course, while permitting the assessee to raise an

additional ground, the AAC should exercise his

discretion in accordance with law and reason. He

must be satisfied that the ground raised was bona fide

and that the same could not have been raised for good

reasons. The satisfaction of the AAC depends upon

the facts and circumstances of each case and no rigid

principles or any hard and fast rule can be laid down

for this purpose.”

14.A division Bench of this Court in case of Commissioner

of Income Tax v. Kashi Nath Candiwala [2005] 144 Taxman

840 (All.) relying upon the judgment of Nirbheram Deluram

(supra) and Jute Corporation of India (supra) held that in

view of Explanation to Section 251 of the Act the appellate

authority is empowered to consider and decide any matter

arising out of proceedings in which the order appealed against

was passed.

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INCOME TAX APPEAL No. - 159 of 2016

“7. We have heard Sri A.N. Mahajan, learned standing

counsel for the revenue and nobody has appeared on

behalf of the respondent-assessee. The learned

counsel for the Revenue submitted that under the

Explanation to section 251 of the Act, the Appellate

Authority is empowered to consider and decide any

matter arising out of proceedings in which the order

appealed against was passed notwithstanding the fact

that such matter was not raised before him by the

appellant and therefore, even though the trading

results were not subject-matter of the appeal before

the Commissioner of Income Tax (Appeals), he was

justified in going into the trading results and

substituting it by his own findings. Shri Mahajan has

relied upon a decision of Apex Court in the case of CIT

v. Nirbheram Daluram [1997] 224 ITR 610 wherein the

Apex Court has held that the Appellate Assistant

Commissioner is entitled to direct additions in respect

of items of income not considered by the Income Tax

Officer. The Apex Court has followed its earlier

decision in the case of Jute Corpn. of India Ltd. v. CIT

[1991] 187 ITR 688 and has held that the power of the

Appellate Assistant Commissioner is coterminous with

that of the Income Tax Officer and he can do what the

Income Tax Officer can do and also direct him to do

what he has failed to do.”

15.Further two decisions relied upon by the counsel for the

Revenue are in case of CIT v. K.S. Dattatreya [2011] 197

Taxman 151 (Kar.) and CIT v. McMillan & Co. [1958] 33 ITR

182 (SC).

16.Sri Agarwal submitted that the reliance placed on the

decision of Shapoorji Pallonji Mistry (supra) and Rai

Bahadur Hardutroy Motilal Chamaria (supra) are completely

distinguishable on facts, as in both cases the Court held that

the AAC could not travel outside the record that is to say the

return made by assessee with a view to finding out new source

of income not disclosed.

17.Lastly the counsel for the Revenue submitted that there

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INCOME TAX APPEAL No. - 159 of 2016

was no requirement of issuance of fresh notice of

enhancement once this Court restored the matter back to the

CIT (A) to consider the material, giving an opportunity to

assessee and fixing 31

st

December, 2014 as last date for

submission of documents/ material and several opportunities

being provided by the first appellate authority thus, question of

fresh issuance of notice does not arise.

18.We have heard Sri Rakesh Ranjan Agarwal, learned

Senior Advocate assisted by Sri Suyash Agarwal, learned

counsel for the assessee and Sri Krishna Agarwal, learned

cousel for the Revenue.

19.Before proceeding, a glance of provisions of Section 251

of the Act is necessary, which is extracted hereasunder:-

“251. (1) In disposing of an appeal, the Commissioner

(Appeals) shall have the following powers—

(a) in an appeal against an order of assessment,

he may confirm, reduce, enhance or annul the

assessment;

(aa) in an appeal against the order of

assessment in respect of which the proceeding

before the Settlement Commission abates under

section 245HA, he may, after taking into

consideration all the material and other

information produced by the assessee before, or

the results of the inquiry held or evidence

recorded by, the Settlement Commission, in the

course of the proceeding before it and such

other material as may be brought on his record,

confirm, reduce, enhance or annul the

assessment;

(b) in an appeal against an order imposing a

penalty, he may confirm or cancel such order or

vary it so as either to enhance or to reduce the

penalty;

(c) in any other case, he may pass such orders

in the appeal as he thinks fit.

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INCOME TAX APPEAL No. - 159 of 2016

(2) The Commissioner (Appeals) shall not enhance an

assessment or a penalty or reduce the amount of

refund unless the appellant has had a reasonable

opportunity of showing cause against such

enhancement or reduction.

Explanation.—In disposing of an appeal, the

Commissioner (Appeals) may consider and decide any

matter arising out of the proceedings in which the

order appealed against was passed, notwithstanding

that such matter was not raised before the

Commissioner (Appeals) by the appellant.”

20.A careful reading of Section 251 reveals that power vest

in Commissioner (Appeals), in an appeal against an

assessment order, where he can confirm, reduce enhance or

annul the assessment. Explanation to Section 251 further

clarifies the position and empowers Commissioner (Appeals)

to consider and decide any matter arising out of proceedings in

which the order appealed against was passed, notwithstanding

that said matter was not raised before him by the appellant,

meaning thereby that power exercisable by CIT (Appeal) under

Section 251 cannot be restricted to only the issues raised by

the appellant in any appeal before him, but Commissioner can

exercise his discretion in accordance with law.

21.The first argument raised by the counsel for the assessee

that the CIT (A) while exercising power of enhancement under

Section 251 of the Act cannot consider new source of income

which was not dealt by the Assessing Officer, in the present

case cannot be accepted as after the remand by this Court,

the CIT (A) as well as the Tribunal in depth had recorded a

finding that there was no new source of income on which the

additions had been made and it was all on the records

produced before the Assessing Officer that the CIT (A) had

made additions of labour charges as well as addition of sundry

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INCOME TAX APPEAL No. - 159 of 2016

creditors to the extent of Rs.15.00 lacs.

22.It has been argued by the counsel for the Revenue that

CIT (A) has not travelled beyond the books of accounts and

during appeal it was found that only confirmation was available

of five parties and the rest of the creditors were untraceable,

hence the addition of the amount was made which were part of

the books of account. Likewise, the addition made as far as

the labour charges are concerned was also on the basis of the

books of account submitted by the assessee as such, it cannot

be accepted that the CIT (A) had made additions on the basis

of new source of income.

23.The argument of the counsel for the assessee relying

upon the decision of the Apex Court in case of Shapoorji

Pallonji Mistry (supra), Rai Bahadur Hardutroy Motilal

Chamaria (supra) and Sardari Lal & Co. (supra) cannot be

accepted as the said judgments have their very basis where

the Appellate Assistant Commissioner had made addition or

deletion on the basis of new source of income, but present

case is not of new source of income, as CIT (A) has relied

upon the books of accounts submitted by the assessee along

with his return and had claimed expenditure made by him in

profit and loss account and claim of sundry creditors shown in

balance-sheet.

24.The Apex Court while dealing with the power of the

Appellate Assistant Commissioner under Section 251 of the

Act had in case of Nirbheram Deluram (supra) and Jute

Corporation of India (supra) had held that power of Appellate

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INCOME TAX APPEAL No. - 159 of 2016

Assistant Commissioner is coterminous with that of Income

Tax Officer and he can do what the Income Tax Officer can do

and also direct him to do what he has failed to do.

25.In the present case, the CIT (A) had deleted addition

made by the Assessing Officer and had made two additions of

the labour charges and sundry creditors on the basis of the

profit and loss account, and balance-sheet filed by the

assessee along with his return. Thus, there was no new

source of income as claimed by the assessee. The case law

relied upon by the assessee in case of Sardari Lal & Co.

(supra) and Shapoorji Pallonji Mistry (supra) are all

distinguishable in the facts of the present case, and the

Hon'ble Courts in those cases had only dealt with the situation

wherein AAC found new source of income and made additions

to the income, while in the present case no such addition was

made from any new source of income but from the return so

submitted by the assessee himself.

26.The second question as regards the issuance of fresh

notice of enhancement by the CIT (A) is concerned has no

relevance, once the order of the Tribunal as well as CIT (A)

was set aside by this Court on 10.12.2014 restoring the appeal

back to CIT (A) for reconsideration and fixing 31

th

December,

2014 as last date for the appellant to file all required

information and documentary material and to appear before

CIT (A) on 05

th

January, 2015. The question of law raised by

the assessee is of no consequence as he, thereafter, had filed

the documents before CIT (A) and had appeared, thus, the

question of issuance of fresh notice for enhancement does not

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INCOME TAX APPEAL No. - 159 of 2016

arise and the CIT(A) rightly decided the question so raised

before it.

27.As far as question no. (III) and (IV), which the appellant

had incorporated in his appeal with the permission of the Court

are not substantial question of law and are questions of fact

which have been dealt with by, both CIT (A) and the Tribunal in

depth and have categorically recorded finding of fact, for which

no interference is required in this appeal.

28.Thus, argument of the counsel for assessee cannot be

accepted so as to restrict the power of Commissioner

(Appeals) on the ground of new source of income, as Section

251 clearly envisages the power of the appellate authority for

considering and deciding any material arising out of

proceedings in which order appealed against was passed. In

the present case, all the materials looked upon by the

appellate authority was before the assessing authority, as such

the Commissioner (Appeals) rightly proceeded to decide the

same as it arose out of the proceedings of assessment.

29.The Apex Court has also affirmed that power of

Commissioner (Appeals) cannot be restricted and in the case

of Jute Corporation of India Ltd. (supra) held that the power

of the Commissioner (Appeals) being coterminous with that of

the Income Tax Officer, he can do what the Income Tax Officer

do and further the section also empowers him to direct the

Assessing Officer to do what he had failed to do. The power of

the Commissioner is not bridled in any way and the language

of the section is plain and simple.

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30.Having considered the material on record and the law

laid down by the Apex Court in regard to the power of

Commissioner (Appeals) exercisable under Section 251 of the

Act, we are of the considered opinion that the order of the

Tribunal needs no interference and the appeal of the assessee

is dismissed.

31. The questions of law are, therefore, answered in favour

of the Revenue and against the Assessee.

Order Date :- 03.09.2019

V.S.Singh